Sunday, May 5, 2013

Finance: German Stock Market (DAX) Defying Euro Crisis

Europe´s economy is sticking in a deep mess, but the stock market seems not to care. Last week the DAX, the gauge for the German stock market, climbed on an all-time high. How can that be?

1. The members of the DAX (the index has just 30 companies like the Dow Jones) are global companies (de.finance.yahoo). Take for instance Adidas. Their fashionable sport shoes and other apparel are very popular in the U.S., China and other markets. The same with the cars from Daimler & BMW. And Volkswagen is big in China & Brazil too.

The conglomerate Siemens delivers power plants, transportation systems and other infrastructure all over the world. Deutsche Bank is one of the largest financial power houses. And the reinsurer Münchener Rückversicherung (Munich Re) covers earthquake, storm and other risks in the Americas & Asia.

Many exporters in the DAX are benefitting from the rising consumer spending in the U.S., China and other big markets outside of Europe. Last weeks´s news about the climbing job creation in the U.S. is more important for them than reports about Greece.

2. German companies are in some way benefitting from the crisis. Last week the European Central Bank lowered interest rates again because of the recession. The crisis also reduces the exchange rate of the Euro on the financial markets which is favorable for European exporters

4. Stock markets don´t care much about the presence, stock prices are anticipating the expected future. The harsh austerity policy, that caused the recession in Europe, will lead to less government spending & bureaucracy which creates scope for more private investment. This, the record low interest rates and strong export markets in the U.S. and emerging countries should lead the European economy soon out of this mess.